UPI CHARGES: MDR is neither a tax nor a cess, says FM Nirmala Sitharaman

STC NEWS MONITORING DESK
SRINAGAR, SEPTEMBER 23 (STC): The revised merchant discount rate (MDR) framework for select UPI transactions is “neither a tax nor a cess”, and that the charge is not to be collected from consumers.
Union Finance Minister Nirmala Sitharaman stated this on Monday.
The framework, announced by the National Payments Corporation of India (NPCI), will take effect on October 15 and applies to specified person-to-merchant transactions above Rs 2,000. “It is neither a tax nor a cess; the funds will not be deposited into the Consolidated Fund of India. It is a charge levied by service providers to improve the system and provide better service, not for small transactions,” Nirmala Sitharaman said and added that it “is a charge between operators” and “will not be passed on to the consumer”.
She said the burden of the charge does not fall on the customer.
“I provided a clarification on this very point when the issue was raised during the parliamentary session,” she said, adding that efforts to spread misconceptions and mislead the public are “wrong”.
“The public needs to remain vigilant,” Sitharaman said and accused the Opposition of using the issue to attack the government.
Notably, under the revised rules, person-to-person (P2P) UPI transfers remain completely free. Person-to-merchant (P2M) payments up to Rs 2,000 also stay zero-MDR, meaning the vast majority of everyday digital payments will continue to be free for merchants.
For specified P2M transactions above Rs 2,000, merchants will pay 0.4 per cent of the transaction value as MDR, capped at Rs 300 for payments of Rs 75,000 and above.
Certain categories of payments — those related to railways, telecom, insurance and fuel — will attract a flat Rs 5 MDR for transactions above Rs 2,000, while capital-market payments – such as mutual funds and stock brokers – will carry a lower 0.02 per cent MDR, also capped at Rs 300.
The MDR collected will be shared among ecosystem participants — issuer bank, acquirer and app provider — to support infrastructure, cybersecurity and innovation in the UPI network.
The government has said that the levy is not a revenue measure for the exchequer, but a mechanism to strengthen the digital payments ecosystem.
(Straight Talk Communications/ Inputs from Agencies)